Late today, a federal judge in Seattle approved a class-action lawsuit challenging Microsoft's "Vista Capable" marketing program as deceptive. U.S. District Court Judge Marsha Pechman also ruled that Washington law will govern the case.

The plaintiffs' complaint stems from Microsoft's efforts to prop up PC demand after Windows Vista's release was delayed, missing the 2006 holidays -- a key sales period for consumer PCs.

Their allegation is that "a large number of the PCs certified as 'Windows Vista Capable' can only operate 'Vista Home Basic,' which does not include any of the enhanced features unique to Vista and which make Vista attractive to customers," according to Pechman's order (PDF, 25 pages). "In addition, in October 2006, Microsoft offered PC customers an 'Express Upgrade Guarantee Program,' which purportedly allowed consumers purchasing 'Windows Vista Capable' PCs to receive upgrades to Vista for little or no cost. In fact, plaintiffs allege, the upgrade for many of these customers is only to Vista Home Basic."

They say that the "real" Vista -- based on the company's marketing -- is the "Premium" version of the operating system, with features such as the Aero user interface. Microsoft says it described the different features of all four versions of the operating system it released. The other three are "Basic," "Business" and "Ultimate."

Microsoft also argued that some PCs carried a "Premium Ready" sticker to indicate that they had the necessary hardware to run the Premium version, and that the Basic version still represents an upgrade from Windows XP.

Pechman limited the scope of the class and the arguments that plaintiffs can make as the case goes forward. Some of those restrictions:

-- The class can't pursue injuries from participation in the "Express Upgrade" program "unless they amend their complaint to add a named plaintiff who participated in the program."

-- Plaintiffs can't rely on the legal theory that Microsoft's "deceptive advertising induced consumers to purchase PCs that they would not have otherwise purchased."

-- They may, however, pursue a " 'price inflation' theory, i.e. that plaintiffs paid more than they would have for their PCs had Microsoft's 'Windows Vista Capable' marketing campaign not created artificial demand for and/or increased prices of PCs only capable of running Vista Home Basic."

Here's Pechman's official class certification language:

"All persons and entities residing in the United States who purchased a personal computer certified by Microsoft as 'Windows Vista Capable' and not also bearing the 'Premium Ready' designation.

"Excluded from this class are: (a) Defendant, any entity in which defendant has a controlling interest or which has a controlling interest in defendant; (b) Defendant's employees, agents, predecessors, successors or assigns; and (c) the judge and staff to whom this case is assigned, and any member of the judge's immediate family."

Microsoft spokesman Jack Evans issued a statement shortly after the order was issued:

"We are currently reviewing the court's ruling. We believe the facts will show that Microsoft offered different versions of Windows Vista, including Windows Vista Home Basic, to meet the varied needs of our customers purchasing computers at different price points."